How to preserve a bankrupt corporation's NOL

Article Abstract:

Assessing its net operating loss (NOL) is one of the most important considerations for a financially troubled company filing for Chapter 11 bankruptcy. The preservation of the NOL, possibly the firm's most valuable asset, for future use could depend on how the bankruptcy reorganization plan is structured. One of the first issues that tax planners working to protect a bankrupt company's NOL is the regulations governing income from discharge of indebtedness. Another major area that needs to be considered is the limitations on how much accumulated NOL may be applied to offset annual taxable income after a change in the ownership of the company as specified in Section 382. The ordinary limitation, however, does not apply to reorganizing companies that issue at least 50% of their stock to old shareholders and to creditors whose claims are 18 months old or more.

Planning, Bankruptcy, Business losses

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How S corporation shareholders can turn the one-class-of-stock limit to their advantage

Article Abstract:

The Subchapter S Revision Act of 1982 changed provisions governing S corporation distributions and expanded the definition of what it means to have one class of stock. In particular, the issue was resolved as to whether stock with voting and nonvoting rights can be released without making a second class of stock. It remains unclear what limits exist for determining whether a debt instrument has crossed a line and moved outside safe-harbor provision boundaries. Courts have generally ruled that debt-equity rules do not apply in the Subchapter S arena, since the tax-avoidance opportunity they were created to protect against does not actually exist. Opportunities exist for imaginative practitioners to restrict S corporation stock, despite remaining uncertainties.

Valuation, S corporations

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An examination of the differential information hypothesis

Article Abstract:

An empirical analysis of the effects of dividends on firm value reveals that there is an insignificant difference in the market reaction between different size companies. The Cumulative Sum Technique of Hillmer and Yu was used to determine the beginning and end of the reaction period with firm size effect adjustments. Data reveal that the effect of firm size on price reaction is not as significant as in other studies.

Investor Relations, Dividend Policy, Dividends

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